August 2001 - eBusiness in Today's Turbulent Times

Taking Care of eBusiness - Thomas Siebel; Eight Essential Principles of eBusiness; Five Step eBusiness Transformation Methodology; The e-Commerce Honeymoon is Over, Now What? - Roger Blackwell & Kristina Stephan; The e-Commerce Marriage Remains; Which Applications are Most Likely to Work Online?; Resources (links, books, articles, software, humor)
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eBusiness in Today's Turbulent Times

This month we offer three guest authors who are thought leaders for current business models such as eBusiness, eCommerce and eMarketing.

Taking Care of eBusiness

by Thomas M. Siebel, co-Founder, Chairman and CEO of Siebel Systems Inc.

What issue — more than any other — keeps today's CEO awake at night? Competing for customers.

While various forces — including globalization, deregulation, privatization and technological innovation — are converging to produce an unprecedented level of competition, the radical shift in power from sellers to buyers now presents the greatest single challenge for businesses of all kinds.

The implications of this new reality — one in which customers are firmly in charge and organizations are increasingly unable to differentiate themselves through product features, functionality and price — are profound.

The next key source of sustainable competitive advantage is the ability to deliver a consistently satisfying experience to the customer — and to leverage the demand chain by developing superior abilities to identify, select, acquire and retain profitable, loyal customers.

A passionate commitment to helping our customers succeed is the secret behind the success of Siebel Systems, the world's leading provider of eBusiness applications software.

The third-fastest-growing company in the U.S. in 2000 (according to Fortune magazine) and the fastest growing software company in history, Siebel Systems achieved an astonishing 782,000 percent revenue growth over its first five years of operation.

Today, it dominates virtually every market it has entered, spurring BusinessWeek to declare it a "Goliath" in customer relationship management.

The philosophy and techniques underlying our company's consistent ability to create unparalleled customer satisfaction and sales are described in my new book, Taking Care of eBusiness.

Drawing upon the real-world experiences of hundreds of organizations that have implemented eBusiness capabilities with Siebel Systems' help, the books also provides a framework that companies of any size, in any industry, can follow to improve employee productivity, increase revenue and maximize customer satisfaction.

There is a misconception that eBusiness simply means buying and selling products and services over the Internet. Our broader view of eBusiness focuses on the key processes that directly enhance revenue — namely, customer acquisition and retention through sales, marketing and service. This customer-centric view of eBusiness is not limited to the Internet, but rather applies to all aspects of the customer relationship, whether online or offline.

Reduced to its essence, the point of eBusiness is to leverage information and communication technologies to make it easier, more pleasant and increasingly valuable for customers to do business with your organization — in any way the customer wants — and, at the same time, to maximize the value of every customer interaction.

The first wave of eBusiness, which gained momentum in the latter 1990s, really had more to do with eCommerce than eBusiness. With "Internet mania" having now burned itself out, we are entering a second phase of eBusiness, one in which attention is shifting from Internet-centric eCommerce to customer-centric, multi-channel eBusiness.

This second wave is being lead by organizations such as Chase Manhattan, The Dow Chemical Company, IBM, Marriott, and WorldCom.

Based on the best practices of these and other leading companies, we offer the eight essential principles of eBusiness, which together provide a clear framework which other business leaders can use to design, develop and deploy an eBusiness model:

Principle # 1: Know Your Customer

The real power of eBusiness comes from the ability to capture, manage and leverage information in order to better understand the customer and — as a result — better anticipate and serve customer needs.

By knowing its customers in deep detail, a company can leverage that knowledge to precisely configure products and services to meet its customers' unique requirements and preferences and build strong customer relationships.

Principle # 2: Use Multiple Channels to Interact with Customers

No single trend affects organizations more today than the expansion of both distribution and communication channels.

This multi-channel coordination problem can only be solved by implementing a global eBusiness architecture that enables the organization to track and record — in real time — every customer interaction at every touch point.

Developing a coordinated multi-channel capacity provides customers with a continuous, seamless, experience and brings the organization numerous rewards, including reduced selling costs and the ability to reach more customers.

Principle # 3: Personalize the Customer Experience

Most individuals appreciate being recognized as a unique customer and having their specific needs addressed.

Today's eBusiness technologies enable organizations to reinfuse their customer relationships with one-to-one personalization and return to relationship-based marketing, sales and service — thereby reaping the benefits of improved customer loyalty.

Key concepts that organizations should apply to create personalized experiences for their customers include individualizing marketing content, enabling customers to customize the environment and personalizing interactions through all channels and points of customer contact.

Principle # 4: Optimize the Value of Every Customer

Ultimately, an organization's overall success is the sum of the value it derives from each of its interactions with its customers.

On the micro level, this means focusing on maximizing the value of every individual customer interaction, both in terms of creating value for the customer — by providing excellent service, for example — and receiving value, by generating revenue, moving a prospect closer to a purchase decision or strengthening customer loyalty.

On the macro level, it means using resources strategically to extract maximum value from every customer relationship.

Principle # 5: Focus on 100 Percent Customer Satisfaction

Properly implemented, an organizational focus on 100 percent customer satisfaction acts as an "early warning system" to detect weaknesses that cause dissatisfaction and, ultimately, loss of customers.

In addition, increased customer satisfaction leads to increased revenues.

To achieve "100 percent customer satisfaction," the organization must first strive to satisfy 100 percent of its targeted customers — those that are desirable, profitable and whom the organization has elected to serve.

Second, it must focus on completely satisfying — instead of merely satisfying — its target customers.

Doing this is the key to customer loyalty and superior long-term financial performance.

Principle # 6: Develop and Maintain a Global, Customer-Centric eBusiness Architecture

The essential component of eBusiness architecture is a centralized repository of customer and product information that provides the organization with a single, 360-degree view of the customer.

Another key requirement it that the system architecture be capable of updating information dynamically, in real time, as customers interact with the system, whether online or offline.

The system architecture must also be flexible, integrated with back-office systems and other applications, and scalable — capable of handling efficiently tens of thousands of concurrent users.

To be truly global, an eBusiness system must also support the languages and currencies in every location in which the organization does business.

Finally, it must provide customers with a single, consistent view of the organization — one that enables them to communicate in a seamless way.

Principle # 7: Leverage and Extend the Ecosystem

In the era of eBusiness, success increasingly depends on the effectiveness of the organization's "ecosystem" — the constellation of constituents, including customers, partners and employees, that are tightly connected via the organization's global eBusiness architecture.

Organizations must increasingly view their relationships with customers as partnerships and continuously experiment with innovative ways to bring customers into the organization's ecosystem.

So too, organizations must integrate their business partners and employees into their ecosystem, using eBusiness solutions both to improve the overall consumer experience and to achieve dramatic productivity gains.

Principle # 8: Cultivate an Organizational Culture Built on eBusiness Excellence & Innovation

Transformation into an eBusiness requires both significant change throughout the organization and the maintenance of a strong organizational culture.

Therefore, both the words and actions of top executives should reflect a deep-seated commitment to becoming an eBusiness.

Organizations must create compensation and incentive structures that reward managers and employees for supporting eBusiness goals.

So too, to improve organizational speed and agility, management needs to create the structure and set the policies that promote swift action, including avoiding lengthy analysis, flattening the hierarchy, regularly testing its assumptions and experimenting with new approaches to marketing, sales, and service.

Five Step eBusiness Transformation Methodology

In addition to the Principles, we use a five-step methodology that organizations can use to launch the eBusiness transformation process.

This five-step process begins with identifying the organization's eBusiness strengths and weaknesses and evaluating its growth strategy, enabling the organization to assess its capabilities and define specific eBusiness objectives.

Those objectives then drive various action plans, including: defining and managing the organizational change required to support the eBusiness strategy; assigning roles and responsibilities for "virtual teams" that serve customers; implementing the required technology; and monitoring, measuring, and tracking the performance of the eBusiness strategy.

Organizations that excel at eBusiness never lose sight of one basic fact: the fundamental objective of every organization is to profitably acquire and retain customers.

Nothing about eBusiness changes that essential truth.

Business begins and ends with customers. Without them, an organization simply has no business — with or without the 'e.'

About the Author

Thomas M. Siebel is the co-Founder, CEO and Chairman of Siebel Systems, Inc. A noted industry spokesperson, Mr. Siebel is the author of Virtual Selling (Free Press, 1995) and Cyber Rules (Currency/Doubleday, 1999), which has sold more than 150,000 copies.

A graduate of the University of Illinois at Urbana-Champaign, where he received a B.A., M.B.A. and M.S. in computer science, Mr. Siebel was named one of the top executives of the year by BusinessWeek and was ranked number three on Upside magazine's "Elite 100" list.

Copyright and Permission

Many thanks to Thomas Siebel for sharing his wisdom and to David Drake at Doubleday for permission to use the article!

The e-Commerce Honeymoon is Over: Now What?

By Roger Blackwell and Kristina Stephan

Managers of most businesses today are struggling with how best to capitalize on the opportunities the Internet has to offer. Yet they know application of the technology is fraught with problems.

In order to avoid the pitfalls that e-business pioneers have suffered during the last few years, first managers must understand a few fundamental rules of creating killer e-strategies:

Avoid technology for the sake of technology — only introduce new technologies into your existing mix if they enhance customers' service levels, satisfaction and overall experience with your company
Unless a new technology offers a significant advantage to customers, they will usually stay with their current product or way of buying
e-Commerce has two parts — "e" and "commerce." The e stands for the easy part of the equation. Focus on the commerce functions — sourcing, order fulfillment, logistics, transportation and delivery, inventory management, and customer service — before selling online.
The more you involve your customers in the process of creating better service experiences, the more likely they are to maintain long term relationships with your firm.

The e-Commerce Honeymoon is Over

Developing effective e-Commerce strategies begins with understanding the future role of the Internet in consumer and business-to-business buying. Examining the current state of connectivity and online activities gives managers a glimpse into the future of the Internet.

Three historic events occurred in the first half of 2001.

First, the U.S. Department of Commerce announced that for the first time in history, total retail sales on the Internet decreased in the first quarter of 2001. Until then, online sales had increased significantly each year.
Second, the number of dot-com failures increased to 330 in the first half of 2001, up from 225 last year (according to Webmergers, a San Francisco research and advisory service).
Third, it was announced in July 2001 that personal computer sales in the United States declined for the first time in twenty years.

The e-Commerce Marriage Remains

Despite the problems facing online sales and e-commerce today, not all is doom and gloom.

In fact, today all firms have to develop a Web strategy because today the Internet is an important medium in any firm's portfolio of customer-driven marketing strategies.

The fact of the matter is that the number of people using the Internet continues to grow, as does the total number of hours spent on the Internet-they may be buying less online, but they are communicating and collecting information more.

AOL, which provides Internet connections for over half of all connected consumers in the United States, is still adding customers (although at a decreasing rate). And some Internet companies are actually profitable. Also, we believe that after the holiday retail surge, total retail sales for the year are still likely to surpass last year's total of $28.5 billion.

Sure the honeymoon-days of rapid growth and irrational exuberance may be over, but all firms need to learn the valuable lessons of the numerous dot-com failures and figure out where to go from here.

The challenge for managers will be to evaluate what parts of e-commerce make sense for their particular firms or divisions.

What combination of sales, customer service, branding, product information, warranty details, investor relations, or procurement should be offered online? The answers depend on the nature of the business and the state of the marketplace.

In other words, firms have to provide the right mix of these elements based on what their current and potential customers are most likely to buy.

And there is another twist — people can examine why some firms have succeeded in the past while others have failed, understand which applications are most likely to be successful and profitable in the future, and guide their investments (401Ks or otherwise) accordingly.

Which Applications are Most Likely to Work Online?

In the business-to-commerce (B-to-C) sector, the firms most likely to succeed are those selling products with specific characteristics.

Look for firms:

That focus online sales of specialty products — unique, hard-to-find items not readily available to consumers in stores
Sell items not readily accessible locally
Offer a limited selection of products online, but give consumers reasons to visit physical stores which are usually more profitable than online or catalog offerings
Use the Internet to sell off-season or clearance items, sometimes in an auction format
Sell items that retailers don't want to carry in stores because of low inventory turns or because of physical limitations (unusual sizes of shoes or equipment that has only a specialized application)
Concentrate on sales of digital products (such as stocks or electronic airline tickets) where logistics are not a problem compared to products for which molecules must be moved expensively to consumer homes.
Use the Internet for selling repeat orders of low-touch, standardized items (such as printer cartridges or prescriptions for maintenance pharmaceuticals).
Use the Internet for distributing information rather than making sales, such as offering instruction booklets and answering frequently asked questions that may be need to be answered when stores are not open or store personnel are not available.

In the business-to-business (B-to-B) sector, many firms will succeed — not necessarily those using the Internet to sell products.

The Internet is for much more than selling and some of the most promising applications are in industrial firms or business services that:

Use the Internet for internal business processes such as filing expense reports
Use the Internet for collaborative project planning by employees and a way to share employee intellectual capital in diverse geographic locations
Use the Internet for instant messaging with suppliers and other key members of the supply chain
Use the Internet to communicate and coordinate with key resources outside the firm, such as filing insurance claims or transmitting catalogue materials to distributors
Use the Internet for reordering and payment processes without human interaction for routine transactions
Use the Internet to improve customer relationships and service with CRM (Customer Relationship Management) software and analytical tools

The firms most likely to succeed online are the ones that were successful before the Internet.

Why? Because they understand well how to delight their customers, and they use e-commerce to enhance their positions in the minds of customers. Wal*Mart, Target, and GE focus on offering what customers want, when they want it, and how they want to buy it.

They understand that the Internet is not a business strategy in and of itself; it is just another tool firms can use to connect with customers.

When designed with the customer in mind, online strategies can increase customer loyalty, decrease procurement and inventory carrying costs, and enhance customer relationships.

When executed poorly, they can disappoint customers and create a drain on profits.

About the Authors

Dr. Roger Blackwell is Professor of Marketing in the Max Fisher College Of Business at The Ohio State University. Kristina Stephan is Vice President at Roger Blackwell Associates, Inc., a consulting firm in Columbus, Ohio.

They are co-authors of Customers Rule! Why the E-Commerce Honeymoon is Over and Where Businesses Go From Here (Crown Business Books, 2001). Additional information and contact with the authors is available at www.rogerblackwell.com.

Copyright and Permission

Many thanks to Roger and Kristina for sharing their wisdom and to Will Weisser at CrownBusiness/Random House for facilitating this article.

Internet Resources

eBusiness Forum (lots of articles and resources including Best Practices and Global eBusiness information; an awesome amount of material on this site) http://www.ebusinessforum.com
Brint.com (one of the most complete resource sites on business and technology) http://www.brint.com/ebiz/
Computerworld eCommerce Community (feature articles, discussion groups, etc) http://www.computerworld.com/community/ecommerce
CIO Magazine eBusiness Resource Center http://www.cio.com/forums/ec/
CIO Magazine Customer Relationship Management Resource Center http://www.cio.com/forums/crm/
e-Gateway (European Commission) Lots of articles and resources for small businesses http://www.e-gateway.net/
eBusiness links (Ireland and worldwide) http://www.enterprise-ireland.com/ebusiness/links.asp
eCommerce Guide http://ecommerce.internet.com/
EBusiness Trends (IDG) current topics and research http://www.idc.com/ebusinesstrends/
eBusiness Europe (French) http://www.ebusiness-europe.com/Public/Welcome.html
European Directive on Data Protection http://www.privacy.org/pi/intl_orgs/ec/eudp.html (links for many languages)
European Directive on Data Protection http://www.doc.gov/ecommerce/eudir.htm (downloadable version in Word)
Webmergers - a San Francisco- based research and advisory service for buyers & sellers of Internet properties http://www.webmergers.com
Law Firm Baker & McKenzie - links to e-Law articles and resources http://www.bmck.com/ecommerce/home.htm
Marketing Periodicals and E-zines http://www.wilsonweb.com/webmarket/ezines.htm

Books - Disclosure: We get a small commission for purchases made via links to Amazon.

Taking Care of eBusiness: How Today's Market Leaders Are Increasing Revenues, Productivity, and Customer Satisfaction. Thomas M. Siebel. Currency/Doubleday Books. June 2001 ISBN 0-385-50227-3
Customers Rule! Why the e-Commerce Honeymoon is Over & Where Winning Businesses Go From Here. Roger Blackwell & Kristina Stephan. Crown Business. June 2001 ISBN 0-609-60865-7

Articles

"Tips and Strategies to eBusiness Success" http://www.bizmove.com/topics/ebusiness.htm
"A Survey of Internet commerce in small and medium sized enterprises." in Ireland http://www.nuigalway.ie/acc/staff/wgolden/survey/
"Electronic Commerce Primer" http://www.nemonline.org/mirl/ec/primer.htm
"International Telecommunications Transborder Dataflows" (Powerpoint slide show)
Collection of articles on eStoreFront issues http://www.estorefrontsolutions.com/articles/default.asp?section=2
Collection of articles on eCommerce http://www.awardsites.com/articles/list-ecm.htm
Collection of articles (targeted to wood products companies, with useful general information) http://www.woodplanet.com/main/resources/articles.cfm
"Internet Acceptance is the Driving Force Behind eCommerce" http://www.directionsmag.com/article.asp?ArticleID=18
"How to Select a Web Designer for a Sales-Oriented Site, Part I."
"Peter Drucker - the Next Information Revolution" http://www.versaggi.net/ecommerce/articles/drucker-inforevolt.htm
Collection of articles on e-Commerce and e-Marketing http://www.redtienda.com/english/articles.htm
"Getting on board the e-Commerce" http://www.aitecafrica.com/old/cia/articles/ecommerce.htm
"eCommerce FAQ" http://www.enscript.com/shop-faq.html
"Ecommerce Statistics" http://www.view2.com/Articles/ec_stats.htm
"Leadership in E-Commerce: What Does it Take to Lead an E-Commerce Venture?"
"e-Commerce and the Law: e-Commerce Beyond the Boundary" http://www.trinidadlaw.com/ecommerce/articles/beyond.html
Collection of eCommerce articles from India Times http://www.indiatimes.com/infotech/ecomm/articles.html
"Learn from Dotcom Failures"

Software

Siebel Systems, makers of Customer Relationship Management systems for corporation. http://www.siebel.com
Colorado Soft (e-mail marketing and management tools for Windows). They have a strict No Spam policy for their products. We now use World Merge software for our monthly newsletter notices. http://www.coloradosoft.com Disclosure: if you buy one of their products through this link, we will receive a referral commission.
Yahoo list of website analysis software